According to David, a great start is to apply a formula that every business owner should know. The formula provides a basic understanding of your financial situation. First, identify assets to include real estate, company vehicles, office equipment, and capital. The assets are always set equal to the equity. There are two types of equity, the first being creditors and the second being the owners. Creditor equity will include bank loans, working capital loans, friends and family loans, and lease equipment agreements. Owners equity will include personal cash/savings, retirement account and sale of personal assets. Once you determine your Creditor and Owner Equity you add them together which equals the full amount of Equity in your business. You want Assets to equal your Equity.
One other piece of advice from David, “Taking a basic accounting class can help you be prepared to take on any job. It is so important for business owners to have basic accounting skills.”